Darling feels pressure over Budget

The pressure is ratcheting up on Alistair Darling as he prepares to deliver his debut Budget amid more economic gloom.

The Chancellor is facing demands from Cabinet colleagues and backbenchers for billions of pounds extra to help meet key pledges on child poverty.

Meanwhile, the Tories are urging cuts in levies on business and insisting that expected tax hikes on strong booze and gas-guzzling cars should be handed straight back to consumers.

But Mr Darling's already-limited room for manoeuvre appeared to be getting even smaller with predictions that he will be forced to lower growth forecasts.

Despite having downgraded his GDP predictions for this year to 2%-2.5% in October, economists believe this could be reduced further to 1.75%-2.25%.

Such a slowdown, caused by flagging consumer spending and continuing fallout from the credit crunch, would place further strain on the public finances.

Philip Shaw, chief economist at Investec Securities, said: "The Budget is likely to include downward revisions to GDP forecasts for this year and next. The gloomier outlook suggests that the Treasury's 2008/09 and 2009/10 borrowing forecasts will be raised significantly - we estimate to £39 billion and £41 billion."

The worse-than-anticipated performance will make it even more difficult for Mr Darling to forgo a 2% rise in fuel duty due to take effect next month. Motorists have been clamouring for the hike to be abandoned amid soaring international oil prices which have been inflicting pain at the pumps.

The Tories have insisted that any extra revenue from hikes in alcohol tax and gas-guzzling cars should not go back into the Treasury's depleted coffers.

Shadow chancellor George Osborne said: "What we are saying is if you increase taxes on 4x4s or alcopops then you should reduce taxes elsewhere. I do not want to see Alistair Darling on Wednesday use either the environment or binge drinking as an excuse for additional taxes."